Correlation Between Genuine Parts and Designer Brands
Can any of the company-specific risk be diversified away by investing in both Genuine Parts and Designer Brands at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Genuine Parts and Designer Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Genuine Parts Co and Designer Brands, you can compare the effects of market volatilities on Genuine Parts and Designer Brands and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Genuine Parts with a short position of Designer Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genuine Parts and Designer Brands.
Diversification Opportunities for Genuine Parts and Designer Brands
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Genuine and Designer is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts Co and Designer Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Designer Brands and Genuine Parts is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Genuine Parts Co are associated (or correlated) with Designer Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Designer Brands has no effect on the direction of Genuine Parts i.e., Genuine Parts and Designer Brands go up and down completely randomly.
Pair Corralation between Genuine Parts and Designer Brands
Considering the 90-day investment horizon Genuine Parts Co is expected to generate 0.75 times more return on investment than Designer Brands. However, Genuine Parts Co is 1.34 times less risky than Designer Brands. It trades about 0.2 of its potential returns per unit of risk. Designer Brands is currently generating about -0.32 per unit of risk. If you would invest 11,311 in Genuine Parts Co on August 23, 2024 and sell it today you would earn a total of 958.00 from holding Genuine Parts Co or generate 8.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Genuine Parts Co vs. Designer Brands
Performance |
| Timeline |
| Genuine Parts |
| Designer Brands |
Genuine Parts and Designer Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Genuine Parts and Designer Brands
The main advantage of trading using opposite Genuine Parts and Designer Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genuine Parts position performs unexpectedly, Designer Brands can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Designer Brands will offset losses from the drop in Designer Brands' long position.| Genuine Parts vs. Dover | Genuine Parts vs. Cincinnati Financial | Genuine Parts vs. Leggett Platt Incorporated | Genuine Parts vs. Illinois Tool Works |
| Designer Brands vs. Wolverine World Wide | Designer Brands vs. Weyco Group | Designer Brands vs. Steven Madden | Designer Brands vs. Rocky Brands |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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